Cyprus property prices surge — foreign buyers contribute to rising demand

The housing market in Cyprus experienced a notable upswing during the first quarter of 2023, as property prices continued to soar, particularly in the apartment segment, primarily driven by increased demand.

According to data published on Tuesday, the Central Bank of Cyprus (CBC) reported a substantial acceleration in the House Price Index (HPI) compared to previous quarters.

The indicators for property sales and demand in Q1 2023 confirm the upward trajectory of housing demand in the market.

In addition, sales document data from the Department of Land and Surveys (DLS) revealed a significant surge in housing demand on an annual basis.

Foreign buyers contributed significantly to the annual surge, accounting for approximately half of the total buyers in 2022 and the first quarter of 2023.

Moreover, the rate of increase in construction costs appears to be stabilising compared to the period of 2021-2022, when significantly higher growth rates were recorded.

During Q1 2023, the House Price Index (HPI) for the districts of Limassol and Larnaca experienced acceleration, while in the Paphos district, despite a slightly slowing trend, the rate of increase in property prices remained high.

The HPI recorded a quarterly increase of 2.1 per cent during the first quarter of 2023, compared to 1.6 per cent in the previous quarter.

The rise in the HPI was driven by a 2.3 per cent increase in apartment prices and a 1.7 per cent increase in house prices compared to the previous quarter.

On an annual basis, there was also a 7.7 per cent increase in house prices during the first quarter of 2023, compared to 6.6 per cent in the fourth quarter of 2022.

Apartment prices showed an annual increase of 8.4 per cent, while house prices rose by 6.6 per cent during the same period.

While in 2022, the surge in housing prices was mainly influenced by increased construction costs, the first quarter of 2023 indicates that the upward trend is primarily driven by increased demand, according to data from the sales documents of the Department of Land and Surveys.

The demand for properties appears to be supported by structural factors, as buyers are not purchasing properties for speculation but rather for primary residence purposes or development projects.

Additionally, despite the rise in housing loan interest rates due to the monetary policy of the European Central Bank (ECB), the overall demand for properties does not seem to have been significantly affected until the first quarter of 2023.

This suggests that the Cyprus property market continues to show resilience and attractiveness to both domestic and foreign buyers.

Higher increases recorded in Limassol, Larnaca, and Paphos

During the first quarter of 2023, housing prices on a quarterly basis showed an increase in all districts. Specifically, Nicosia recorded a rise of 1.3 per cent, Limassol 2.9 per cent, Larnaca 2.6 per cent, Paphos 0.3 per cent, and Famagusta 2.3 per cent.

As for the annual changes in the housing price indices per district, an increase was registered in all districts for the sixth consecutive quarter.

Specifically, Nicosia’s house prices increased by 4.3 per cent, Limassol by 10.6 per cent, Larnaca by 7.7 per cent, Paphos by 6.8 per cent, and Famagusta by 4 per cent.

The relatively high rate of increase in housing prices in the districts of Limassol, Larnaca, and Paphos may be attributed to demand from foreign buyers due to the headquartering policy, which incentivises companies to relocate their headquarters to Cyprus.

In contrast, in the Famagusta district, the rate of increase in property prices has slowed down in the last two quarters.

On a quarterly basis, house prices increased in all districts except Paphos. Specifically, Nicosia increased by 1.3 per cent, Limassol by 2.8 per cent, Larnaca by 2.2 per cent, Famagusta by 2.9 per cent, while Paphos saw a decrease of 1.1 per cent.

On an annual basis, house prices increased in all districts. Specifically, Nicosia, Limassol, Larnaca, Paphos, and Famagusta recorded increases of 4.2 per cent, 9.4 per cent, 5.8 per cent, 5.7 per cent, and 5 per cent, respectively.

Apartment prices on a quarterly basis also increased in all districts. Specifically, Nicosia increased by 1.4 per cent, Limassol by 2.4 per cent, Larnaca by 3.5 per cent, Paphos by 4.3 per cent, and Famagusta by 1.2 per cent.

On an annual basis, apartment prices continued to rise in all districts for the seventh consecutive quarter.

Specifically, during the first quarter of 2023, Nicosia’s apartment prices increased by 4.4 per cent. This was followed by price increases in Limassol by 10.4 per cent, Larnaca by 12.3 per cent, Paphos by 10.3 per cent, and Famagusta by 2.4 per cent, compared to the corresponding quarter of 2022.

Properties sold to foreign buyers increase by a third

Notably, the number of sales documents continued to show an 18.8 per cent increase on an annual basis, reaching 3,574 sales documents compared to 3,009 in the corresponding period last year. This reflects the increased demand for properties.

During the quarter in question, there was a 33.6 per cent increase on an annual basis in the number of properties sold to foreign buyers (1,706 compared to 1,277), mainly from countries outside the EU.

Additionally, the number of properties sold to domestic buyers increased by 7.9 per cent on an annual basis (1,868 compared to 1,732).

This increase in sales documents to foreign buyers is primarily attributed to the aforementioned headquartering policy, which has attracted foreign professionals from countries such as Russia, Israel, Ukraine, the United Kingdom, Lebanon, and Belarus.

Furthermore, the restrained supply of new properties is reflected in the construction production index, specifically in the buildings category. The index is recorded and updated by the Cyprus Statistical Service (Cystat).

After six consecutive quarters of annual declines, the index records a 5.5 per cent annual increase in the first quarter of 2023.

As for the number of residential buildings for which building permits were approved, which serves as an early indicator of construction activity, there was a 6 per cent annual decrease in the first quarter of 2023.

This is the fifth consecutive quarter of decline in the number of residential buildings for which building permits are issued, indicating the restrained supply expected to continue in the future.